FCC Moves to Ax Access Regulations

9/22/2012 12:29 AM Eastern

By: JOHN EGGERTON

WASHINGTON — The head of the Federal Communications Commission has proposed lifting a ban on distributors’ exclusive programming deals while preserving a higher bar for must-have sports programming, multiple sources said last week.

He is expected to get enough votes to approve the change.

At press time, commission aides were still taking meetings with concerned parties and poring over chairman Julius Genachowski’s proposal to sunset the outright ban on exclusive contracts between vertically integrated distributors and their co-owned programming networks.

An order that circulated late on the Friday before Rosh Hashanah, the start of the Jewish New Year, took many both inside and outside the commission by surprise, according to FCC sources.

BIG VS. SMALL

The National Cable & Telecommunications Association was not commenting on the draft order, but it had petitioned the FCC to sunset the provision.

Less happy will be the smaller cable operators represented by the American Cable Association. They weren’t commenting either last week, but had argued that the prohibition was needed so its members could continue to have access to must-have programming like regional sports networks.

Smaller operators would face the prospect of having to file a complaint rather than be guaranteed access, a tougher route for smaller operators having to pony up the bucks for a Washington lawyer to run that legal gauntlet.

In essence, what the FCC is doing is expanding its solution for closing the “terrestrial exemption” loophole to cover all exclusive contracts with vertically integrated companies.

In January 2010, the FCC decided cable operators that do not share their owned terrestrially-delivered regional sports networks with competitors will be presumed to be in violation of FCC rules against unfair acts or practices. That will now be the presumption for satellite-delivered sports networks, too, and also will apply to complaints about non-RSN programming.

So, why did the Democratic chairman make that deregulatory move?

When the program-access rules were adopted 20 years ago in response to a congressional mandate, the nascent satellite-TV industry had not even gotten off the ground. Now, DirecTV and Dish Network are the second- and third-largest multichannel video providers in the country, behind Comcast. An FCC source familiar with the draft said it recognizes that market shift.

In addition, the U.S. Court of Appeals for the D.C. Circuit, in upholding the program-access rules against a Cablevision Systems challenge, sent a strong signal that when the FCC considered renewing the exclusive contract prohibition for another five years, the ban likely was ready for sunset. (Unless renewed, the rules expire on Oct. 5.)

The prohibition against unfair practices does not sunset.

Speaking on background, one cable attorney said he did not see a big impact from the decision. He pointed out that except for one C-band satellite-dish complaint early on, no complaints have been filed that did not relate to the terrestrial exemption.

In addition, the only major MSO with extensive channel holdings is Comcast, but the FCC has already taken care of access issues related to the nation’s largest cable operator for years to come.

COMCAST CARVED OUT

Just as with the network-neutrality rules, Comcast has program- access conditions extending into 2018 that were imposed as part of its NBCUniversal merger.

“In reality, I don’t think this will have much impact,” Bernstein Resarch analyst Craig Moffett said.

“Today, the only vertically integrated cable operator is Comcast, with its 51% stake in NBCUniversal. Cablevision spun off its programming assets into Madison Square Garden and Rainbow over the last few years, and Time Warner Cable was fully separated from former parent Time Warner Inc. in 2009,” Moffett said in a note to investors last week.

Comcast also is subject to a consent decree that guarantees access to its RSNs and cable networks on fair and reasonable terms, enforced by so-called baseball-style, winner- take-all arbitration.